By Paul Weinstein Jr. and Marc Dunkelman|May 26, 2009
The Obama administration has been right to focus much of its energy on re-capitalizing the nation's banks. Renewed growth depends largely on an end to the credit crisis.
But for all the focus on Wall Street, the way out of the current recession may depend more on Main Street. Analysis of the nation's economic history reveals that the housing market's resurgence has led a wider turnaround in five of the last seven recessions.
So a renewed focus on pumping up home-buyer demand may be worth additional attention from Washington.
Unfortunately, most news out of the residential real estate industry remains grim. Sales of existing homes fell more than 7 percent in March from last year. And the U.S. median sales price slid over 12 percent.
But there is a small beacon of hope. The Commerce Department reported recently that new-home sales surged 4.7 percent from January to February. And while much of that was driven by falling prices, another factor played a big role: a sudden burst of interest from first-time buyers.
Nearly one-half of all sales in February were to individuals and families without title to an existing home. No doubt, the absence of a mortgage left many first-time buyers with fewer barriers to entry.
But more than that, the explosion in demand was likely driven by the impetus to take advantage of the $8,000 first-time home-buyer credit included in President Barack Obama's economic stimulus package.
The cause of the credit's success is no mystery. For most families looking to purchase a home, $8,000 can go long way toward covering a down payment or completing their initial renovations. But the Obama administration included a further impetus to speed the resurgence in demand: plans to dissolve the credit at the end of the year.
In public life, it is a rare pleasure to point to a nearly unmitigated policy triumph. But, the first-time homebuyer credit may qualify. Given its singular success driving up demand in the housing market, it is time for Washington to consider how to broaden its reach.
In that vein, we recommend that Congress quickly send President Obama a bill expanding the program beyond first-time buyers, encouraging existing homeowners, as well as those dipping their toes into homeownership for the first time, to invest in a new primary residence.
